ASML is the Most Important Company in the AI Ecosystem, and It Just Delivered Record Results. Here’s Where the Stock Will Be in 2028

The artificial intelligence (AI) hardware ecosystem has been rattled lately by high interest rates, concerns about the viability of heavy spending on AI infrastructure, potential challenges in accessing capital to fund the build-out, and rising competition from China. However, the latest results from arguably the most important company in the AI infrastructure ecosystem suggest that the fears may be overblown.

ASML Holding (NASDAQ:ASML) released its third-quarter results on Oct. 14. It not only delivered record results but also raised its full-year guidance. What's more, management's comments clearly suggest that the strong AI infrastructure spending environment isn't going away any time soon.

Let's take a closer look at ASML's results and check why it is a good idea to buy this semiconductor stock right now.

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ASML's phenomenal growth is sustainable

ASML reported record revenue of 11.7 billion euros for the third quarter of 2026. That's an improvement of 56% from the year-ago period's revenue of 7.5 billion euros. Even better, ASML's gross margin increased to 57.5% last quarter from the prior-year period's reading of 51.6%. This robust jump in ASML's margins isn't surprising, as the company enjoys robust pricing power.

After all, the Dutch company is the only manufacturer of extreme ultraviolet (EUV) lithography machines. These machines are used for printing advanced chips based on small process nodes, which are deployed in AI data centers to run training and inference workloads efficiently. Major foundries, such as TSMC and Intel, along with major memory manufacturers, deploy ASML's machines to produce cutting-edge chips.

The healthy improvement in ASML's margins, owing to its monopolistic position, explains why its earnings per share increased by a whopping 136% year over year to 12.95 euros per share. Importantly, ASML management's comments make it clear that the company can sustain such terrific growth rates.

ASML CEO Christophe Fouquet noted on the latest earnings call that the company's customers don't expect supply to catch up with demand "at least until 2028." Similarly, ASML won't be able to meet customer demand despite its aim to increase supply by 30% in 2027 and 2028.

ASML's position as the only manufacturer of EUV lithography machines means it can continue charging customers a premium, benefiting its bottom line in the future. Not surprisingly, ASML's guidance reflects the same.

The company expects 14.7 billion euros in revenue for the current quarter at the midpoint of its guidance range, implying a 51% increase over the prior-year period. Moreover, ASML expects its gross margin to increase from 52.5% in the same period last year to 57% in the current quarter, indicating that its earnings per share are poised for a big jump once again.

I won't be surprised to see ASML's margins improve further, at least through 2028, due to robust demand for its machines. This could pave the way for a stronger-than-expected increase in the company's earnings per share over the long run, setting ASML stock up for solid gains.

ASML could outperform expectations and deliver solid gains

If you're looking to add a growth stock to your portfolio, ASML looks like an ideal candidate. The stock trades at 29 times forward earnings, which is a premium to the S&P 500 index's forward earnings multiple of 20.

However, that premium can be justified by the fact that ASML's earnings are expected to jump 67% in 2026, according to Yahoo! Finance consensus estimates, well above the 32% earnings jump projected for S&P 500 companies. However, as the chart below shows, ASML's earnings-per-share growth rate is expected to slow over the next couple of years.

ASML EPS Estimates for Current Fiscal Year data by YCharts

The points discussed above suggest that ASML could clock a faster growth rate in 2027 and 2028, exceeding consensus expectations. Assuming its bottom line increases by 45% a year in both years, its earnings per share could reach $97.49 in 2028 (using 2026's projected earnings per share of $46.37 as the base).

If the stock continues to trade at 29 times earnings at that time, its stock price could jump to $2,827. That implies a potential upside of 72% in just over two years, indicating that it isn't too late for investors to buy ASML following its 53% rally in 2026.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Intel, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.